By Nick Mann | 4 March 2013

US President Barack Obama has warned that the US economy is already suffering from the $85bn package of spending cuts that took effect automatically on Friday following Congress’s failure to agree an alternative deal.

Speaking on Saturday, Obama said that while not everyone would feel the impact of the cuts – known as the ‘sequester’ – straightaway, many middle-class families would have their lives disrupted in a significant way.

‘These cuts are not smart. They will hurt our economy and cost us jobs,’ he added, warning that the sequestration could threaten the US’s recovery from the worst economic crisis in his lifetime.

‘At a time when our businesses are finally gaining some traction, hiring new workers, bringing jobs back to America – the last thing Washington should do is to get in their way,’ he said. That’s what these cuts to education, research and defence will do. It’s unnecessary. And at a time when too many of our friends and neighbours are still looking for work, it’s inexcusable.’

The immediate pain would begin to be felt this week by those working for, or in partnership with, the military, the president said, while ‘hundreds and thousands’ of people working for agencies such as the Border Patrol and the Federal Bureau of Investigation would have their wages cut and hours reduced.

‘This will cause a ripple effect across the economy. Businesses will suffer because customers will have less money to spend,’ he said. ‘The longer these cuts remain in place, the greater the damage. Economists estimate they could eventually cost us more than 750,000 jobs and slow our economy by over one-half of 1%.’

The sequester ‘can and must’ be replaced by a balanced approach that combined ‘smart’ spending cuts with changes to the tax code that made it ‘more fair’ to families and businesses without raising tax rates, Obama stressed.

Calling for Republicans and Democrats in Congress to agree on a long-term deficit reduction deal, he added: ‘I know there are Republicans in Congress who would actually rather see tax loopholes closed than let these cuts go through. And I know there are Democrats who’d rather do smart entitlement reform than let these cuts go through. There’s a caucus of common sense. And I’m going to keep reaching out to them to fix this for good.’

John Boehner, the head of the Republican majority in the House of Representatives, laid the blame for the sequester coming into effect on Obama and the Democrat majority in the Senate.

Speaking on NBC’s ‘Meet the press’ yesterday, he asked: ‘Why haven't Senate Democrats passed the president's plan? The House has passed a plan twice, over the last ten months, to replace the sequester. Senate Democrats have done nothing. It's time for them to vote.

‘It's time for us to get back to regular order here in Congress... We have this sequester because the president demanded it and because Senate Democrats have refused to act.’

The US government must ‘live within its means’ by making spending cuts, he added. ‘The president has run up five trillion dollars worth of debt in the last five years. We have another one trillion dollar budget deficit this year. It's time for the president and Senate Democrats to get serious about the long-term spending problem that we have.’